Consumer credit increased by $1.3 billion in November

Credit cards were not among the forms of consumer credit that increased in November. (Photo Credit: CC BY-SA/Colin/Flickr)

Bloomberg reports that consumer credit rose for the second straight month in November, a sign that consumer confidence may be on the rise. The $1.3 billion November increase in consumer lending, paced by government-held student loans, followed a $7 billion increase in October.

Consumer credit increased in auto, education fields

Non-revolving loans such as auto loans and student loans were up by $5.6 billion, according to November figures. Revolving consumer credit continued its 27-month nosedive by falling $4.2 billion, which indicates that maintaining high interest debt over time is becoming less attractive to U.S. consumers. It also means that even though consumer confidence may be increasing, times when emergency cash is needed still lend themselves to products like payday loans rather than credit cards.

Positive economic signs, with more to come

Theresa Chen, a Barclays Capital Inc. economist in New York, reportedly told her clients that the road ahead will be long.

“Consumer credit is still rebounding off the bottom. This is broadly in line with the rise in household spending that we have already seen over the past few quarters,” she said.

Even though a full recovery is far away, November’s $1.3 billion consumer credit increase still outpaced the $500 million recovery many economists forecast for the month. This pleasant surprise, along with a larger than expected U.S. jobs increase and unemployment rate decrease to 9.4 percent, helped bolster the Standard & Poor’s 500 Index. The S & P 500 ended 2010 with a 13 percent gain.

November auto sales another positive sign

The November consumer credit increase translated into another good month of sales for the automotive industry. According to Bloomberg, auto sales hit a seasonally adjusted 12.26 million annual rate in November, followed by a further increase to 12.53 pace in December. Combined, the 37.04 million rate for the final quarter of 2010 was the strongest the auto industry has seen since 2008’s third quarter.